4/24/2025
Independent Directors of Phillips 66 Issue Letter to Investors and Their Stewardship Teams
Business Wire (04/24/25)
Phillips 66 (PSX) today sent a letter from the Independent Directors of the Board to the Company’s shareholders and to independent proxy advisors, particularly those involved in assessing corporate governance topics. "Due to the unique nature of shareholder engagement in 2025 and our concerns with the agenda Elliott is pushing," the letter begins, "this letter is written directly to the stewardship teams, proxy advisers and all shareholders who prioritize strong corporate governance. This letter is intended to highlight critical areas for consideration that uniquely pertain to corporate governance, independence, and transparency. It is our strongly held view that two core tenets of best-in-class corporate governance are transparency and independence. Transparency allows shareholders to make informed decisions with full, complete, and straight-forward information. Independence ensures that a Board is impartial, unbiased, and objective in its pursuit of protecting the interests of all shareholders. We have been surprised and concerned by the actions taken by Elliott in pursuit of its campaign to break-up Phillips 66. These actions, in our view, reveal a concerning disregard for good corporate governance, raise important questions of independence and demonstrate an alarming pattern of opaque disclosure." The letter expresses concern over Elliott’s expectation of director loyalty. "Elliott is seeking to replace Bob Pease, a Board member it supported only one year ago. Does this sudden switch in support, and Elliott’s own acknowledgment of its effort to have one-on-one conversations with Bob during the time he has been on our Board, suggest an expectation of loyalty to the activist and its thesis instead of fair evaluation of what is in the best interest of all shareholders? Elliott, who is compensating its purportedly independent nominees, denied Phillips 66 access to those nominees for interview and evaluation, despite multiple attempts from Phillips 66. In fact, one of Elliott’s nominees told representatives of Phillips 66 that he was instructed not to engage directly and instead referred the Board to Elliott itself. Does this action further reveal an expectation of loyalty rather than true independence? Elliott’s competitive interests merit careful attention." The letter also notes that on Elliott's recent podcast episode, John Pike confirmed that the same Elliott professionals on their energy team invest in public equities and private situations. "At what point does pursuit of control of a company while trying influence the strategy of a direct competitor raise conflicts of interest concerns? Has Elliott adequately disclosed this competitive position to Phillips 66 shareholders? Should shareholders have legitimate concerns about how Elliott’s interests may differ from those of other Phillips 66 shareholders? Elliott and affiliated parties have provided misleading, incomplete disclosure." The letter continues: "As you know, we are fully committed to declassifying the Board so that each of our directors is up for election each year. Our last attempt to do so received approval from 73% of outstanding shares. With the attention this annual meeting is receiving, we are hoping that voter turnout will be higher than ever to achieve this important governance milestone. But unlike Elliott, we want to do so legally, completely and without subjecting the Company to litigation and reputational harm. Elliott is asking us to devise a slipshod workaround to declassify the Board in a de facto manner, without obtaining the required stockholder vote to do so. Put simply, if implemented, Elliott’s annual resignation proposal would contravene Delaware law, our Company’s charter and by-laws and our Board’s fiduciary duty to shareholders. Some resignation policies are acceptable, but not those with the specific purpose of evading a corporate charter. We will not establish the dangerous precedent of conveniently disregarding and circumventing our fundamental governing documents." The letter also claims that Elliott’s lawsuit "further exhibits its lack of transparency and preference for theatrics over engagement."
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